China Unicom leading the pack for iPhone deal

In the tug-of-war that has kept the iPhone out of China in the two years since it's been on the market, China Unicom is purportedly closest to reach a deal but still faces an attack from dominant carrier China Mobile.

Analyst Shaw Wu of Kaufman Bros. claims to have sources aware of Apple's leanings and gives China Unicom the nod as Apple favors the finances, hardware compatibility and degree of control it would get through an agreement. It's reportedly more willing to heavily subsidize the iPhone to its creator's satisfaction and to let Apple have its usual say over the device and its software, both of which are doubtful through China Mobile. Rumors have long swirled that China Mobile is insisting on controlling the local App Store, a practice that Apple hasn't allowed once in the history of its cellphones.

The smaller of the two Chinese carriers has 'just' 133 million carriers compared to China Mobile's 488 million but is in the middle of deploying a 3G cellular network that uses UMTS and WCDMA, both standards that are already supported by the iPhone 3G and 3GS. Choosing China Unicom would let Apple keep selling the same iPhone in China as it does elsewhere while also getting more reach: the faster network should reach 284 cities within several months.

In comparison, China Mobile's government-supported TD-SCDMA standard for 3G would require that Apple incorporate a custom chipset just for the one carrier and would come with growth limitations of its own. Despite having over three times as many customers, the larger carrier will reach nearly 50 fewer cities with its 3G and doesn't anticipate the network reaching complete coverage until three years from now, or well after China Unicom's network is ready.

Wu's same anonymous contacts, however, maintain that Apple doesn't entirely consider China Mobile "out of the running" both through its sheer influence and its interest in the iPhone, which would be a victory even in a country well-known for grey market imports.

No matter who's taking the lead, the researcher doesn't see a deal with either carrier as close enough to force a change in predicted iPhone numbers for now and the year ahead. About 20 million iPhones should ship in 2009 and 26 million in 2010. All the same, he notes that Chinese shouldn't necessarily be disappointed without an official deal thanks to the nation's thriving bootleg community.

"Our sources indicate that iPhones will likely continue to flow into China," Wu says. "There are an estimated 1 million-1.5 million iPhones in use despite lack of an official carrier relationship."

Apple should just give the deal to both companies and stop this dancing around. Competitors are moving fast and faster into China, and Apple no matter how unique need to sprint into action very soon.

The numbers alone are impressive that youd think that Apple would make any HW configuration and give them any control that they wanted over the app store they asked for to make it happen. The fact that they are even in talks for so long probably means that the US will not likely see a 2nd carrier for the iPhone for awhile. They simply dont seem interested in that business model.

Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"

The numbers alone are impressive that youd think that Apple would make any HW configuration and give them any control that they wanted over the app store they asked for to make it happen. The fact that they are even in talks for so long probably means that the US will not likely see a 2nd carrier for the iPhone for awhile. They simply dont seem interested in that business model.

With C Unicom their 133m could/would double overnight in my opinion putting them on equal footing with C Mobile and Apples iPhone stays the same as it is sold elsewhere. 20m in 2009 and 26m in 2010 seems miniscule to me if deal is made now.
I'm remembering someone predicting that China would become the leading democratic nation of the free world in the 21st Century. Could Apple's iPhone be a catalyst? I for one, hope so.

Good grief! Not another year going by without an official presence of iPhones in China. RIM is going to walk right over to China Mobile and say, "Whatever you guys want, we'll do it. We'll build any BlackBerry handset the way you want it and let you control the 2,000 or so apps we have on hand." And that will be it. RIM will have a head start in China with the biggest carrier and Apple will be still haggling over deferred revenue percentages with the number two carrier. I'm not saying Apple is wrong in doing what it normally does, I'm only saying it will delay Apple from getting first shot in China and will fall behind right away as far as market share goes. It seems with China, the foreign company willing to make the most concessions will win the war. I'm just concerned RIM is going to snatch China right from Apple's hands.

This is only conjecture on my part since probably only a few people know for sure what deal has been done between Apple and China Unicom. I really had thought it was a done deal, but maybe Wu is right.

The Chinese government needs a lot of control to enforce the one child rule and reduce their over population problem. This leans heavily on devices from "free countries" that could influence the population.

Buicks fine, iPhones perhaps never.

In my opinion, the Chinese are stringing Apple along to continue producing the iPhones in China (and other devices), but never intend to allow Apple into it's market.

The danger is that we sleepwalk into a world where cabals of corporations control not only the mainstream devices and the software on them, but also the entire ecosystem of online services around...

It makes sense for Apple to insist on subsidies and control over the App Store. Otherwise the iPhone just becomes a one time sale of a commodity item. My understand is that the TD-SCDMA tech is still unstable and China Mobile will have to depend on its GSM/EDGE network for a long time. Anyway, this standard was implemented as well for China to lower QCOM royalties relative to WCDMA/UMTS and CDMA. That is the kind of hardball the Chinese play.

Anybody who has done business in China, should be aware of the haggling that goes on... the bigger the deal, the more they haggle. Most agreements are not worth the paper they are written on. Then everything gets reneged and renegotiated!

Apple should continue to pursue China on their own terms, it would make no sense for them to cede control just for a bit more market share. Besides, the iPhones being sold in Hong Kong ensure there is already a growing audience for product.

Apple should continue to pursue China on their own terms, it would make no sense for them to cede control just for a bit more market share. Besides, the iPhones being sold in Hong Kong ensure there is already a growing audience for product.

A lot of companies have given up control over their products and most important, key Intellectual Property Rights in order to access Chinese market. In many cases they are forced to take on local partners. All this has allowed the transfer of key technology, manufacturing technology and access to capital.... not to mention local supply chains that enable knock-offs as is the case with the iPhone to a certain extent. I do not think Apple should assemble the phones, etc in China.

How else have the Chinese been able to go from horse and plow, garment factories to a modern industrial state in less than 20 years?

All businesses must focus on profit. Why would Apple give away control of its profits by giving any mobile phone service provider (or government) control of its profit engines/models? That would be incredibly stupid, and yet, many foreign companies have done just that, in order to gain access to the huge population who are mostly poor. Apple's iPhone is a luxury product in the U.S. (the richest country in the world). China's population of about 1.2 billion is mostly poor. Maybe 1-2% could afford the iPhone, and not all of those will choose to do so. Yes, the "middle class" in China (poor by developed countries' standards) will grow, but companies should not make stupid deals, sacrificing profits and control over the next 10 years for *potential* gains in 20-30 years.